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Retail Part of Project Near Carmel Valley

Developer Coast Income Properties Inc. will begin work soon on The Village at Pacific Highlands Ranch, a mixed-use project planned for an area of northern San Diego where retail development has lagged far behind the arrival of thousands of new homes in recent years.

At full build-out, the project northeast of Carmel Valley will have about 195,000 square feet of retail, 330 apartments and public amenities including a transit center, a public library, a central plaza and other open spaces. The La Jolla-based company is not divulging costs.

The 24-acre project, being built north of state Route 56, was approved in late 2013 by San Diego planning officials. Construction on the first 150,000 square feet of retail will begin in the next few weeks, with the first stores to open in first quarter 2015, Coast Income Properties Vice President Daniel Curran said.

Multifamily and other amenities will follow in future phases. Developers said the mixed-use project is designed with a Santa Barbara architectural style and incorporates a pedestrian-friendly “smart growth” layout increasingly favored by community planners, aimed at reducing local vehicle trips.

Curran said specialty grocer Trader Joe’s has signed a lease to open a store at the center, and brokers are in talks with other potential retail and restaurant operators.

Reg Kobzi, one of two local brokers handling leasing, said the neighborhood-focused retail element is designed to serve an area of the city that has seen thousands of new homes, schools and related community amenities built over the past decade.

Retail Slow to Arrive

The Coast project is adjacent to Pardee Homes’ master-planned Pacific Highlands Ranch residential development. In that community, along with three others in the neighboring Torrey Highlands and Black Mountain Ranch neighborhoods, city officials approved a total of about 14,000 new homes over the past decade, roughly 6,000 of which have been built.

But retail and other commercial elements directly serving those neighborhoods have been slow to arrive, in part a reflection of a lingering nationwide slowdown in new retail construction that began when the recession hit.

The developer and brokers anticipate that the new mixed-use project will partly alleviate pent-up demand in those growing communities, which have seen a steady influx of middle- and upper-income families.

“It’s been demanded by the residents for some time now, and it’s long overdue,” said Kobzi, senior vice president in the San Diego office of CBRE Group Inc. “From a retailer’s perspective, the demographics could hardly be better.”

In a recent fourth quarter report, CBRE noted that the local region’s most desirable retail markets — which include the northern beach cities, University Towne Center, La Jolla, Mira Mesa and Mission Valley — collectively saw 2.8 percent overall retail vacancy for the quarter. Landlords generally have pricing power in neighborhoods that lack retail inventory.

The overall San Diego County retail vacancy stood at 6.9 percent at year’s end, the lowest since fourth quarter 2010 but still higher than the 6.2 percent seen just before the recession hit in 2008.

The improving economy is spurring new construction in select markets. The San Diego region saw 392,502 square feet of new retail space delivered in 2013, compared with 337,064 square feet in the prior three years combined, CBRE reported.

Much of the upcoming new retail in the local pipeline is being planned as part of larger mixed-use developments. The largest of those include Sudberry Properties’ Civita in Mission Valley and Corky McMillin Cos.’ Millenia in Chula Vista.

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